The pair were evenly matched over the first two sets but crucial unforced errors from Nishikori in the third opened the door for a tense 6-2 2-6 6-3 victory for the Bulgarian at Pat Rafter Arena.
It was the 25-year-old's first win over Nishikori in four attempts and his first ATP title since 2014.
Dimitrov, ranked 17th in the world, will also be hoping it is the sign of things to come this season as he eyes a return to the top 10 and a strong run at the Australian Open later this month.
"It is, for sure, one of the big moments for me," said Dimitrov, whose ranking blew out to No.40 in July before improving across the second half of the year, and will rise to 15th after his triumph in Brisbane.
"That was kind of an emotional win for me, but in the same time, it wasn't unexpected. I think I have put in the work. I think I have learned a lot.
"I'm pretty humbled, because I have set myself quite high goals, actually, for the first six months, and one of them was actually to win a tournament. And it happened during the first week of the year."
After upsetting top seed and defending champion Milos Raonic in the semi-final, Dimitrov tore through the first set but was dominated in the second as Nishikori turned the tables.
But a lengthy medical time-out for the Japanese world No.5, who attended to pain in his left hip before the deciding set, seemed to resettle Dimitrov's nerves.
A forehand into the net and an overblown backhand from Nishikori gave Dimitrov the chance for the break and, seconds later, he was serving for the match.
Nishikori is now in doubt for Monday's scheduled Fast4 exhibition in Sydney but is confident his preparations for the Australian Open won't be impacted any further.
"It's no big deal, I should be okay," he said.
"Tomorrow I'm not sure I can play. For sure, it will take a couple days (to recover). It was hurting in the second set.
"It's a little bit sad to finish like this."